In order to successfully run their organizations, nonprofit professionals must also be savvy business professionals. Many Arizonans assume that most nonprofits rely entirely on philanthropic contributions, while, in fact, more than 72 percent of nonprofit income is, actually, earned revenue. Nonprofits often generate earned revenue through activities related to their mission, such as arts organizations selling tickets to exhibits and live performances, Goodwill’s sale of donated clothing or Girl Scout USA’s cookie sales. In this way, these organizations serve a social need while also contributing to Arizona’s economic vibrancy.
Earned revenue can be viewed in two main categories: government-funded services and other income-generating activities.
Federal, state and local government contributes nearly one-third of Arizona nonprofits’ annual revenue. However, this income should not be thought of as charitable donations. Rather, governmental bodies turn to the nonprofit community for their expertise in a wide range of social needs. By hiring nonprofits for this work rather than staffing up to do that work themselves, working with nonprofits also keeps the size of government down.
Four out of every ten dollars of revenue generated by Arizona’s nonprofits comes from program service funds and contracts, investment income, special events income, membership dues and more. As in the business community, innovative organizations are always looking to grow into other income-generating enterprises that align with their missions.
Together, these two revenue sources account for more than 72 percent of nonprofit revenue, while contributions and gifts from individuals, foundations, trusts and private companies are estimated to generate only 27 percent of Arizona nonprofits’ annual revenue.
With this in mind, it’s easy to understand how changes in the health of our economy can impact nonprofits as acutely as for-profit businesses. When people are out of work and have less money, they spend less on nonprofit services and pay less in taxes — which can also result in less revenue for nonprofits from governmental sources. This effect is also compounded in times of economic downturn, during which times the need for services provided by nonprofits greatly increases.
To learn more about the economic impact of Arizona’s nonprofit community and download a free copy of the report.
Research for this report was conducted by ASU’s Seidman Research Institute in partnership with the Alliance of Arizona Nonprofits, ASU Lodestar Center for Philanthropy & Nonprofit Innovation and The Phoenix Philanthropy Group. Funding was provided by the Arizona Community Foundation, APS and the Industrial Development Authority of Maricopa County.